Latest / VREF | The Truth About the Aviation Market / Why Bad Deals Start Before the Pre-Buy, and Why Your Network Matters More Than You Think | EP 35
Transcript
- Addison: Welcome back to the Truth About the Market. glad you're here. ⁓ is the show where we cut through the noise and focus on what's actually happening in aviation. Not the hype, not the headlines, just the truth. And I'm your host, Jason Zilberbrand, and I'm president of VREF. I've appraised nearly every type of aircraft out there for clients ranging from the FAA all the way to private owners. And I've owned, operated, bought, and sold my own planes. So when I talk about this stuff, it's not theory, it's experience. And here's something worth saying up front. This podcast is sponsor-free, which means there's no advertisers, there's no companies to appease, and that means there's no incentive to soften the truth. So what you hear today is unfiltered because aviation demands truth and the market punishes misinformation every time. And today's episode focuses on general aviation, but at its core, it's about making high-stakes decisions with incomplete data, because that's where most mistakes happen. Not in the obvious areas, not in the aircraft itself, but in the assumptions. Form before the process even begins. So today we're going to break this into three critical areas. First, we're going to talk about the comparison between the Cirrus Vision Jet and the Epic, because this is not a service level evaluation of specifications or brochure claims. This is about what you're truly acquiring, mission alignment, operating economics, market behavior, and more importantly, how each platform performs when conditions tighten. Secondly, we're going to talk about how to acquire an aircraft without putting yourself in a compromise position. We're going to talk about where transactions actually fall apart and how pre-purchase inspections work and documentation and financing and deal architecture. The elements that never appear on a listing, but ultimately determine whether a transaction closes cleanly, or guess what, it unravels late in the game. And thirdly, we're going to talk about how to build a credible aviation network, a Rolodex, if you will. Because If your process depends on search engines and message boards, or whoever happens to respond first, you're already operating at a disadvantage. This is not a transparent marketplace, folks, it's a relationship-driven one. And the gap between a successful outcome and a costly one is rarely the asset itself. It's the people advising you, guiding you, and shaping the process behind the scenes. So let's get into it. The SF-50 versus the Epic. What are you actually buying? You know, let's clear something up immediately. This is not a discussion about speed or performance or power, and it's not going to be a debate. And it's definitely not about which airplane looks better on a spec sheen or maybe on a ramp for that matter. But this is about how these assets behave in the real world. Operationally, financially, structurally. I see this topic come up more and more these days. A quick Facebook search will provide hours of entertainment, I promise you. So I thought it would be fun to compare the two entry-level aircraft that seem to garnish the most attention in social media, because while the Cirrus Vision Jet and the Epic E1000 appear adjacent in the market, they function in entirely different ecosystems. Alright, so first up is the Vision Jet, because it's a structured platform. You know, when you step into an SF-50, You are not just acquiring an aircraft, you guys know that. You're entering into a fully integrated framework, a culture, if you will. What you're really buying is a standardized operating environment, a super deep developed training pipeline, a robust support network, a clearly defined resale audience. It's the closest general aviation has come to a packaged aviation product designed, supported, and managed with consistency across the fleet. That consistency shows up everywhere. Owners consistently point to the same attributes, a quieter, more refined cabin experience, ease of ingress and egress, and movement and flight, safety architecture that includes caps and automation layers. And that matters. Not just emotionally, but economically, it also matters for your family when these decisions become super important and you're sitting at the dinner table. These things make a difference. From a valuation standpoint, The Vision Jet benefits from a predictable trading behavior. It has a market. It has a wider pool of qualified buyers. And it's easier accessibility for insurance and underwriting is really a pathway that has allowed it to become a successful platform. There's also a psychological component. Buyers, and more importantly, their families, they understand it, right? They're comfortable with it. That comfort translates directly into liquidity. But that structure comes with trade-offs. So what are you sacrificing? Let's talk about it. High-end performance, payload flexibility, mission adaptability? Absolutely. You know, the SF 50 is a rather small aircraft. Payload is not one of its strong suits, and neither is its mission profile. You can't go very far. You certainly can't take a lot of people with you. It's not going to be the plane you go around the country with your buddies and go golfing. But it's an aircraft built around control, accessibility, repeatability. And it's an entry-level jet. So let's shift now. Let's talk about the Epic because it's a capability-driven machine. You know, and that's how the perspective shifts because the Epic is not packaged, it's not standardized in the same way. It is at its core high-performance aircraft that demands competency. What you are acquiring here is fundamentally different. You get speed, climb performance that materially exceed the vision, a mission flexibility. Profile that will allow you to go greater distances with more payload, and a narrower, more experienced ownership profile. And that distinction is not subtle. It defines everything about the ownership experience. Real-world feedback reflects this clearly. The epic is routinely described as the pilot's plane, one that rewards skill but punishes inattention. It delivers exceptional performance, but it does not insulate the operator from decision-making in the same way. That has direct implications. For one, Financing can be more restrictive. I'm not telling you you can't get it financed. I'm just telling you that there's people out there that do it and specialize in it, and it's not going to be a widely recognized platform. Insurance. This is a big one. Underwriting is offer harder to get. It's tighter. And then the last one, which I think is probably the elephant in the room, is the resale ability, because it's going to require a more targeted buyer with the right qualifications. It's not a widely recognized platform, but that is changing. And even operationally, the aircraft demands more. It's faster, but that speed compresses decision cycles. It's capable, but that capability assumes proficiency. So look, for the right owner, someone with clarity of mission and discipline in execution, it is an outstanding platform. I'm a big fan of it. But it's not forgiving. And that's where buyers get it wrong. Most buyers approach this comparison incorrectly, which is why all the Facebook chatter is kind of humorous. Because they focus on cruise numbers and range figures and acquisition cost. And I say, who cares? Those metrics are easy to measure and easy to misunderstand. But what they need to ask, the better questions, what does it look like when I want to sell it? And who's the next owner going to be? And how does the aircraft perform when the market is poor, when the conditions tighten? Because that's where the divergence becomes obvious. Look, folks, when liquidity contracts, the vision jet tends to hold. I mean, let's just be honest. Transaction flow remains relatively stable because the buyer base is broader and more accessible. And the Epic behaves differently. The spread between bid and ask widens. Time on the market widens, and outcomes become more variable. Not because the airplane is inferior, but because it requires a higher level of understanding to transact. One is supported by infrastructure, and the other is supported by expertise. So here's the bottom line, guys. The Vision Jet is a market supported platform. The Epic is a performance-driven platform. One prioritizes accessibility, standardization, and liquidity. The other prior prioritizes capability, efficiency, and pilot engagement. And if you don't recognize that distinction, you're not making a decision, you're taking a guess. This episode is powered by VREF, the standard in aircraft valuation, whether you're buying, selling, financing, or just trying to understand what your aircraft is really worth, VREF it. VREF Online gives you the data that accurately drives decisions, not opinions, not listings, not guesswork, please, not AI. Go to vref.com and vref it before you make the call. Okay, ⁓ so let's talk about part two. I think this is going to be a fun one. It's how to buy an aircraft without blowing your brains out. Because let's be direct. Most transactions don't collapse because of valuation disagreements. They fail because the structure is flawed from the beginning. And by the time that becomes obvious, it's too late to fix. The LOI determines the outcome. The letter of intent is routinely treated as a formality, and that assumption is costly. Because the LOI is not a placeholder. It's the foundation of the entire transaction. Look, guys, it establishes the scope of the evaluation you're going to do and the standards of acceptance. And more importantly, the financial responsibility for discrepancies and the framework for resolving findings. You gotta understand the LOI is designed to prevent conflict. And when conflict arises, you have a framework. You have things to resolve the conflict. It's in writing, it's agreed to by both parties. Now, I'm not telling you it's going to solve all of those conflicts, right? Certainly not going to stop a lawsuit if two parties can't agree. But what it will do is give you a roadmap to closing. More importantly, if the elements you're talking about are vague, undefined, one sided, you basically already surrendered control. And by the time the aircraft reaches the inspection, you're not negotiating position. You're negotiating that is Basically, largely predetermined based on a lot of mistakes you made. And so, a well constructed letter of intent does one thing really well. It preserves the deal while protecting your downside risk. So think about it. If that's what a good one does, then a poorly written one does just the opposite, right? It locks you into a process you no longer can control, terms that are no longer acceptable. So let's talk about the pre buy. And why it's a strategic tool, because this is where most buyers misunderstand the process. I talk about this all the time. It's a popular topic because so many of you continue to get it wrong. The inspection phase is not about fixing the airplane. It's about understanding what you're stepping into. It's a snapshot in time. And pricing that risk is the proper way to look at it, right? So at its core, a pre-buy evaluation serves two purposes. It identifies issues with the aircraft, and it also creates leverage to renegotiate what those issues cost to repair. That's it. It's pretty simple. Don't let it get out of control. What is not? It's not a substitute for schedule maintenance. It's not an opportunity to rebuild components or talk about aesthetics. It's not a justification to clean everything up before closing. See, Transactions take two to tango. And what you're buying is a snapshot in time. And what the pre-buy is telling you is what that snapshot in time looks like from a mechanical standpoint. There is no promises that tomorrow something's not going to break. And so the moment a buyer approaches the process with a repair mindset, the economics deteriorate. Why? Because now you're absorbing costs that either shouldn't be reflected in the purchase price or should remain with the seller. And disciplined buyers separate discovery from correction. Let me repeat that. Disciplined buyers, they separate discovery from correction. They quantify the exposure, they adjust their terms, they renegotiate, and they move forward. Or if they can't, they walk away. Okay, let's talk about step three, documentation, because it drives values. It doesn't drive cosmetics as much as people like to talk about it, and here's a reality most people resist. The paper matters more than the plane. You can have a visually pristine aircraft with incomplete records, and it'll be discounted aggressively. You can have a well-used aircraft with immaculate documentation, and it will trade quickly. Because lenders, insurers, and future buyers are not evaluating the appearance, they're evaluating continuity. Gaps in the logbooks, missing entries. Guys, it comes up every day. I look at two or three aircraft a day where the buyer is coming to me and saying these logs are missing, or there's inconsistencies. And what does that do? It introduces uncertainty. Uncertainty kills transactions. Most of the time I tell people to walk away because it shows up immediately in three places. Whether or not you can get financing, whether or not you can get insurance, and whether or not you can resell the aircraft. So Why do you want to create problems in your life that don't exist? Because you want to buy an airplane. It's just the craziest thing in the world. Look, none of this is going to be visible in the listing. That's why you have to do due diligence. And this is where inexperienced buyers get blindsided. They fall in love with the presentation of the plane only to discover later that the asset is functionally impaired or the market doesn't exist. Okay, step four capital. Because you know what, guys, it's conditional, it's not assumed, there is a persistent misconception that funding will simply be available. It's not like buying a house. That assumption does not hold in aviation. There are no guarantees that lenders are just going to step up and give you money to go buy an airplane. Lenders are not just evaluating the borrower, they're underwriting the entire equation. The aircraft, your financial profile, the market, and how do they get out if something bad happens? We don't talk about defaults, it's gonna be a future episode, because defaults and repossessions are the reason why we do all the belt and suspender stuff up front. That's why lenders go through compliance. See, each component's gotta align. If any one of them doesn't, it introduces risk. And if there's excessive risk, that means the deal's gonna fall apart. This is particularly evident in segmented markets. For example, When an aircraft of broader adoption or standardized support networks tend to move through underwriting more efficiently, platforms with smaller ownership bases or highly operational complexity, they often encounter friction. Those small aircraft companies that make kits that you never heard of, most lenders haven't either. That's why they scrutinize it. So if it's not one of the big name brands, it gets really difficult to build a network, and we're going to talk about that. So, aircraft with deeper buyer pools. Tend to exhibit shorter marketing cycles, right? Makes sense. And tightening pricing dispersion. That also makes sense. While more specialized assets can experience longer exposure and greater variability in outcomes. It's not theoretical, guys. This is how capital behaves. You know, I think it was last episode, maybe it was the episode before, and I talked about the listing price is not reality. And this is where buyers just get crushed. They get roasted in the market. The number you see online is not a transaction. I actually heard of a broker the other day that did a back to back on a business jet and made a couple million dollars. That is a perfect example, right? It's a positioning strategy. What does it do? It reflects seller expectations, broker framing, market sentiment at a moment in time. What actually defines value is what survives that. The inspections, the underwriting, the negotiation dynamics. See, that number is often materially different. And in a shifting market, the gap, it's gonna grow, it's gonna widen. And that's why you see aircraft sit longer, and then you see adjustments, but those adjustments aren't made publicly. And you see deals that never close and they never get reported, and that's the part most people miss. The visible market is not the real market. So here's the bottom line. If a you establish control at the letter of intent stage, and b use the inspection phase to quantify, not fix risk, and then C prioritize documentation over aesthetics, and then D validate capital before committing to purchase, and then E Ignore headline pricing. You're gonna do what? Operate with leverage. And if you skip any one of those, any one of those five steps, you're not executing a strategy. You're reacting in real time, without protection, and a market that does not forgive mistakes. Okay, on to another topic. This one is close to my heart. It's honestly because I get bombarded with questions all the time. And I love helping people. ⁓ it's one of the things that That drew me to this business. But at the end of the day, I think it goes without saying my parents' generation was really good at having a Rolodex. And my kids' generation will have no clue what a Rolodex is. So we're going to talk about what a Rolodex is for those that are under the age of 40. ⁓ at the end of the day, there's another layer to this that most buyers don't fully appreciate until they're already in the seat. Your network doesn't end to closing. Your network, that's a Rolodex. Back in the old days, you used to have they placed a staple business cards and it was like a flip a file. And you would go from A to Z. And that's where you would have basically what you have on your phone, your contacts. It was called a Rolodex. So what you need to do when you buy an airplane is you need to build your Rolodex because your network, it's not going to end a closing. That's when it becomes operational. This is the most important transition. See, the aircraft you choose determines the support you require. Not all aircraft exist with the same ecosystem, right? Some are backed by deep infrastructure. There's a plenty of mechanics that can fix it. There's training, there's service centers, there's consistent parts availability. And then unfortunately, there's others that are not like that. And they're very fragmented. And when I say that, I mean tongue in cheek. I see people all the time trying to find mechanics locally for older aircraft, especially or specialized aircraft. They can't find technicians. There is no lead time. That's how long it is. And a narrower pool of people who truly understand the platform, so troubleshooting is out the window. So what happens? It gets really expensive to operate. And the distinction becomes very real the moment something doesn't go according to plan. Because when everything is working, ownership is a breeze. You know, that's when you can feel confident about buying an aircraft and owning it. But when it's not, That's when your preparation is tested because the question is no longer what the hell did I do? It becomes who the hell can I rely on? Who's going to answer the phone? Who has the authority to solve any of these issues, not just fix it or diagnose it? That's not something you want to figure out on a transient ramp, hundreds of miles away from home. So let's break it down. Geography is an underestimated risk variable, especially for new buyers. Most buyers evaluate performance in terms of speed, range, payload. And that's it. But very few think about service density. But when you operate an airplane, it's important because some regions are rich with experienced maintenance providers, and some are not. And some are going to have access to parts, and some are very thin, with limited support, limited expertise, and limited options when something breaks. And remember Murphy's Law follows aviation to a T. If something can go wrong, guess what? It will. And when you're operating in a thinner environment, small problems escalate quickly. Downtime can be a big problem. You could be stranded from home, right? That's when the decisions get compressed. That's when your network stops being theoretical. That's when all of this becomes critical. So instead of searching, what you need to do is activate, right? You already know who to call, you already know who to trust. And that's what we're going to do here. So pre-purchase versus ownership, different disciplines. Before acquisition, your focus is defensive. You're structuring the deal. You want to identify the risk. Then protect your downside. But after closing, the objective should shift completely to a 180. Now you're managing the asset. So what does that mean? It means you gotta have a disciplined maintenance strategy. Selecting and overseeing vendors to choose, controlling costs. And that means doing so without compromising dispatch reliability or the quality control. And then you gotta preserve long-term marketability. Because every decision you make right now. It's going to have major consequences. Anything you defer, anything you don't document, anything that becomes reactive, it's not going to disappear. It's going to be in the records forever. They accumulate and eventually they show up in one of these places. An increased operating cost, reduced availability to the airplane, or a lower exit strategy with a lower value. So let me give you a little inside strategy here. I'll pull back the curtain. Because there's some things that experienced owners do differently. Seasoned operators, they don't just fly the plane, they manage the system around it. They know with precision who their primary maintenance providers are. More importantly, they know who their backup is when their provider that they normally rely on fails them. And they know who to call when their AOG in a place away from home. They also know which advisor to involve before approving major work and how every decision impacts long-term positioning. They also maintain something simple but incredibly effective a physical laminated contact sheet and they keep it inside the airplane, not buried in a phone, not dependent on a signal or GPS, but a hard physical copy. And when you're in an unfamiliar location, under time pressure, dealing with the real issues, the last thing you want to do is scroll through contacts or rely on memory under pressure. The sheet should include primary and secondary maintenance contacts, AOG response providers, parts suppliers. Your insurance broker, your lender, trusted advisors who you can contact, maybe even your CPA. It sounds basic, but look, in practice, it's one of the most valuable tools you can have. You gotta leverage owner communities, guys. But you gotta also use them correctly. And this is something that I think is so overlooked, especially in piston and owner phone segments. Owner groups, these communities, I can't even tell you how valuable they are when they are used properly, right? So what they do, they provide real world operating insight. You can get immediate feedback from people that actually own the aircraft. You get troubleshooting and practical solutions to all these common problems that you're going to face. And guess what? If you're traveling and you run into a problem and it's 2 a.m. in the middle of nowhere, guess what? You're going to be able to call one of these people and they're going to reach out and they're going to help you. Because I really doubt a shop in that region is going to do anything unless it's normal working hours, right? But there's a distinction. You should rely on these as supplemental resources, not replacements for your core network. I think they're useful for perspective, not decision-making authority, and that's the mistake. You can't treat crowdsourced input as definitive guidance. I know a lot of companies out there they do the same thing. You gotta be careful. It's not, it's directional. Your primary network still drives the outcome. If you're looking at an aircraft and wondering, what is it actually worth? Well, don't guess. VREF it VREF Online gives you real-time data. It gives you quarterly updates, coverage across more than 900 aircraft models. That's like five times more than anybody else in the market. Built on how the market really does behave, not how it's advertised. And this is the platform that every lender and insurance company and serious operator relies on when the numbers have to hold up. So go to vref.com and VREF it before you make a decision. So here's my final thought. Buying the aircraft, it is a transaction. Operating it is a long term discipline. And the difference between controlled ownership experience and a reactive one is very little to do with the airplane itself. It comes down to preparation, comes down to access, and then finally execution. And ultimately, who can you count on when things don't go as planned? Because in aviation, problems don't announce themselves in advance. Remember, Mr. Murphy. They show up uninvited, and when they do, it's Christmas Day, it's Thanksgiving morning, you're not ready, and you're exposed. You know, general aviation is one of the most rewarding areas in aviation because it is real. You know, the exposure isn't obvious, but it's also one of the most unforgiving. It doesn't show up in the aircraft, it doesn't show up in the listing, it lurks beneath the surface inside the process. The structure, the gaps of information that most people never see until it's too late. If you understand what you're acquiring, if you structure the transaction with discipline, and if you surround yourself with the right people, you can operate in this market with confidence and control. But guess what? If you don't, the market will correct you and it won't do it gradually. It will do it through cost, through time, and through decisions that can't be undone. That's the difference, not the airplane. It's the approach. If this episode resonated with you, share it with someone navigating a deal today. And remember this podcast exists for one reason: to analyze aircraft as capital assets, without brokerage spin, and without manufacturer narrative. And lastly, when you need an accurate, defensible data-driven value, there's only one name in the industry to trust, and that's vref. Visit vref.com to get started today. I want to thank you for listening. I'm Jason Zilberbrand, and this is the truth about the market. Until next time, fly safe and stay smart.